Exemption from the requirement to deliver comparative annual financial statements to registered securityholders of certain mutual funds.
Securities Act (Ontario), R.S.O. 1990 c. S.5, as am., ss. 79 and 80(b)(iii).
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, ONTARIO AND NOVA SCOTIA
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
THE FUNDS LISTED IN SCHEDULE "A"
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the Provinces of Alberta, Ontario and Nova Scotia (the "Jurisdictions") has received an application (the "Application") from HSBC Asset Management (Canada) Limited and HSBC Investment Funds (Canada) Inc. (together, the "Managers") and the Funds for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") for relief from the requirement to deliver comparative annual financial statements to the securityholders of the Funds unless the securityholders have requested to receive them;
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this Application;
AND WHEREAS, unless otherwise defined, the terms herein have the meaning set out in National Instrument 14-101 Definitions;
AND WHEREAS it has been represented by the Managers to the Decision Makers that:
(a) The Managers are corporations existing under the Canada Business Corporations Act. The head office of each of the Managers is located in British Columbia.
(b) HSBC Asset Management (Canada) Limited is registered under the Legislation as an adviser in the categories of investment counsel and portfolio manager (or their equivalent), and HSBC Investment Funds (Canada) Inc. is registered under the Legislation as a mutual fund dealer (or its equivalent).
(c) HSBC Asset Management (Canada) Limited is the manager and promoter of each of the HSBC Pooled Funds (as defined in Schedule "A"). HSBC Investment Funds (Canada) Inc. is the trustee, manager, promoter and principal distributor of each of the HSBC Mutual Funds (as defined in Schedule "A"). The Managers will also have the same positions for future mutual funds and pooled funds which may be established from time to time.
(d) Each of the Funds is an open-end mutual fund trust established under the laws of British Columbia by way of declarations of trust.
(e) Each of the Funds is a reporting issuer in each of the Jurisdictions and none of the Funds are in default of any requirements of the Legislation.
(f) Units of the Funds are presently offered for sale on a continuous basis in each of the provinces of Canada (other than Prince Edward Island) pursuant to a simplified prospectus.
(g) Each of the Funds is required to deliver annually, within 140 days of its financial year-end, to each holder of its securities ("Securityholders"), comparative annual financial statements in the prescribed form pursuant to the Legislation. The Funds' financial year-end is December 31.
(h) If the requested decision is granted, the Managers will send to Securityholders who hold securities of the Fund in client name (whether or not the Managers are the dealers) (the "Direct Securityholders") in each year, a notice advising them that they will not receive the annual financial statements of the Funds for the year then ended unless they request same, and provide them with a request form to send back, by fax or prepaid mail, if they wish to receive the annual comparative financial statements. The notice will advise the Direct Securityholders where the annual financial statements can be found and downloaded on the Funds' website as well as on the SEDAR website. The Managers would send such financial statements to any Direct Securityholder who requests them in response to such notice or who subsequently requests them.
(i) Securityholders who hold their units in the Funds through a nominee will be dealt with pursuant to National Instrument 54-101.
(j) Securityholders will be able to access annual financial statements of the Funds either on the SEDAR website, on the Funds' website or by calling the Managers' toll-free line (listed in Schedule 'A'). Top ten holdings, which are updated on a periodic basis, will also be accessible to Securityholders by calling the Managers' toll-free line.
(k) There would be substantial cost savings if the Funds are not required to print and mail annual financial statements to those Direct Securityholders who do not want them.
(l) The Canadian Securities Administrators ("CSA") have published for comment proposed National Instrument 81-106("NI 81-106") which, among other things, would permit a Fund not to deliver annual financial statements to those of its Securityholders who do not request them, if the Funds provide each Securityholder with a request form under which the Securityholder may request, at no cost to the Securityholder, to receive the mutual fund's annual financial statements for that financial year.
(m) NI 81-106 would also require a mutual fund to have a toll-free telephone number for or accept collect calls from persons or companies that want to receive a copy of, among other things, the annual financial statements of the mutual fund.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
AND WHEREAS the Decision Makers are satisfied that making the Decision will not adversely affect the rule-making process with respect to proposed National Instrument 81-106 and is consistent with National Instrument 54-101;
THE DECISION of the Decision Makers pursuant to the Legislation is that until NI 81-106 comes into force:
(i) the Funds; and
(ii) mutual funds created subsequent to the date of the Decision that are offered by way of simplified prospectus and managed by the Managers,
shall not be required to deliver the comparative annual financial statements to their Direct Securityholders other than those Direct Securityholders who have requested to receive them provided that:
(a) the Managers shall file on SEDAR, under the annual financial statements category, confirmation of mailing of the request forms that have been sent to the Direct Securityholders as described in clause (h) of the representations within 90 days of mailing the request forms;
(b) the Managers shall file on SEDAR, under the annual financial statements category, information regarding the number and percentage of requests for annual financial statements made by the return of the request forms, on a province-by-province basis within 30 days after the end of each quarterly period beginning from the date of mailing the request forms and ending 12 months from the date of mailing;
(c) the Managers shall record the number and summary of complaints received from Direct Securityholders about not receiving the annual financial statements and shall file on SEDAR, under the annual financial statements category, this information within 30 days after the end of each quarterly period beginning from the date of mailing the request forms and ending 12 months from the date of mailing;
(d) the Managers shall, if possible, measure the number of "hits" on the annual financial statements of the Funds on the Funds' websites and shall file on SEDAR, under the annual financial statements category, this information within 30 days after the end of each quarterly period beginning from the date of mailing the request forms and ending 12 months from the date of mailing;
(e) the Managers shall file on SEDAR, under the annual financial statements category, estimates of the annual cost savings resulting from the granting of this Decision within 90 days of mailing the request forms; and
(f) this decision shall terminate upon NI 81-106 coming into force.
April 14, 2004.
"H. Lorne Morphy"
"Wendell S. Wigle"
SCHEDULE "A" to MRRS DECISION DOCUMENT
LIST OF APPLICANTS AND THEIR FUNDS